Despite a severe market plunge Thursday, Facebook-parent Meta Platforms' capital spending spree to build the "metaverse" could provide upside for makers of products built into cloud data centers. While Meta stock was ravaged, shares in Arista Networks, chip maker Nvidia and Ciena surged higher.
In reporting its third-quarter earnings, Meta said capital expenditures of $9.4 billion were up 117% year-over-year. That topped analyst estimates of $8 billion.
Further, the wannabe "Metaverse" builder forecast fiscal 2023 capital spending in a range of $34 billion to $39 billion. That's up from an expected $32 billion to $33 billion this year. Analysts had projected Meta capital spending of $28.7 billion in 2023.
The social media giant Meta reported third-quarter earnings after the market close on Wednesday. Meta stock plunged 24.6% to close at 97.94 on the stock market today.
Building The Metaverse
Meanwhile, ANET stock rose 9.3% to finish at 119.13 Thursday. Also, CIEN stock climbed 2.2% to 47.07. And Nvidia stock advanced 2.2% to end the day at 131.76.
"At the midpoint, guidance implies capex grows +75% year-over-year in 2022 and over 12% in fiscal 2023," Raymond James analyst Simon Leopold said in a note to clients. He expects upside for network gear maker Arista and fiber-optics system supplier Ciena.
"These (Meta) investments target data centers, servers, and network infrastructure with AI capacity expansion driving substantially all the capital expenditure growth in 2023," Leopold said.
He went on to say: "We are unsure about the mix of data center construction, networking equipment spending and capitalized software. But upside in spending is a positive indicator to Meta-exposed vendors in 2022 and beyond."
A possible next-generation internet, many expect the metaverse to create 3D digital worlds that incorporate virtual reality or augmented reality. In addition to immersive online gaming experiences, experts see the metaverse having applications in workplace collaboration and e-commerce. It also could be useful in industries such as fashion, retail, education and real estate.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
